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The Dark Road: The Worst Tax Law You've Never Heard About
The New American
Alex Newman
4/8/2014
Excerpt:
It broke Ruth Freeborn’s heart to give up her U.S. citizenship that fateful day last year. Unfortunately for the Oklahoma native, though, it was either that, or her family. Ruth’s Canadian husband of 33 years, who earns all of the middle-class family’s income, “simply could not go along with this situation,” she explained. “To find myself suddenly not able to live, bank, save or to keep peace in my marriage while being American at the same time was shocking at first and deeply disturbing to me.”
Ruth wrote “what must have been” hundreds of letters to U.S. senators and officials, clinging to the hope that something — anything — could be done to stop what felt like a nightmare. Even as she protested, federal bureaucrats claimed that what was happening to her, and millions of other innocent Americans overseas, was somehow a “myth.” She knew it wasn’t a myth — after all, she was living it.
More than three decades ago, Ruth moved to Canada with her husband to help care for his parents, who were elderly and ill. Then the young couple had a son who was born with multiple disabilities and illnesses, making a move back to the United States all but impossible. All those years, though, Ruth went out of her way at every opportunity to show her community what it meant to be an American — doing volunteer work, helping out neighbors, making sure school children could learn in the best possible environment.
“At every turn I made sure to mention to others that the reason I did so much volunteer work was that I was raised to be this sort of person in the United States by my American family,” Ruth told The New American.
Then, in 2010, Congress passed and Obama signed a new tax law buried deep inside an unrelated “jobs” bill. That changed everything. Of course, even before that, it was already hard enough to be American overseas — filing endless amounts of paperwork with the IRS, paying taxes on worldwide income, disclosing foreign bank accounts and assets, and risking life-destroying penalties even for innocent mistakes. When the 2010 scheme became law, though, it was simply too much to bear.
Suddenly, Ruth, like millions of other everyday Americans overseas — missionaries, spouses, teachers, small-business owners, so-called accidental Americans who’ve never even stepped foot on U.S. soil, and countless others — were stuck in a Catch-22. Foreign banks were shutting down Americans’ accounts. Many businesses no longer wanted anything to do with “U.S. persons,” preferring to steer clear of the infamous IRS. Americans abroad were suddenly pariahs.
Ruth’s husband, who makes around $50,000 a year as a technician, drew the line at giving the Obama administration unfettered access to all of the family’s private financial information — and potentially even their meager savings if, for instance, the IRS claimed to uncover some minor mistake or oversight in the mountains of complex paperwork Americans abroad are forced to file every year. Moving to the United States was not an option either.
She cried a lot about it. “I’ll never be truly over the fact that I had to lose my citizenship but, it has happened,” Ruth said, adding that she is “horribly hurt” by all of it. “I still feel as if it must be some bad dream since it cannot be possible that the U.S., the country I loved with all my heart, has caused me to have to choose between my family here in Canada or my country of birth. And yet, it is real.”
To the political class in Washington, Ruth doesn’t exist. Like the millions of other Americans suffering hardship, she’s just a “myth” to the politicians and administration bureaucrats searching, like a flailing drug-addicted giant on the verge of collapse, for just a few extra dollars to stay afloat just a little while longer. Washington is determined to collect that extra billion or so per year in taxes.
So, in 2010, without any hearings or analysis, the Foreign Account Tax Compliance Act (FATCA) — hidden in the misnamed “HIRE Act” and passed largely by Democrats — was officially born. In essence, it is an attempt to turn every foreign government and financial institution on the planet into extensions of the U.S. tax regime, and is supposed to work by imposing huge penalties — a 30-percent “withholding tax” on all U.S. transactions, including sales of securities — on firms that do not hand over all information they have on “U.S. persons” to the IRS.
Among the institutions snared in the scheme are banks, stockbrokerages, hedge funds, pension funds, insurance companies, trusts, and more. For foreign institutions that do not wish to participate, the alternative is total exclusion from U.S. markets. The scheme also forces all “specified” Americans to file more byzantine paperwork disclosing even more assets abroad with their annual tax return, Form 8938, under threat of more devastating penalties that in many cases could exceed the value of the actual assets.
How It Came About
Amid the 2008 news that Swiss bank UBS helped some Americans avoid taxes, the shrieking from Capitol Hill was deafening. “These tax evaders cost our country tens of billions of dollars every year in unpaid taxes, and honest, law-abiding taxpayers pay the price,” claimed former Senate Finance Committee Chairman Max Baucus (D-Mont.), one of the chief proponents of the scheme. “Not only is this practice fundamentally unfair, this is money that could be used in any number of other important areas.”
More recently, wild figures based mostly on fantastical claims rather than actual data have jumped to $100 billion, $150 billion, or even $370 billion that Washington claims to believe is being “lost” to tax evasion. Democrats in Congress were determined to track down every last penny they believed they were owed, even if it meant turning the world upside down.
FATCA was based on “proposals included in President Obama’s 2010 Budget,” its architects in Congress admit. According to its congressional cheerleaders, it was supposed to bring in an extra $8.5 billion of tax revenue to the Treasury over the next decade. (For perspective, the federal government spends over $10 billion in a single day.) The added torment being endured by millions of innocent Americans living abroad — one of the new tax regime’s myriad effects — is supposedly just collateral damage, or a “collateral benefit,” as prominent anti-FATCA activist James Jatras with RepealFATCA.com put it.
“The real purpose, in my opinion, is eventually to achieve the power to receive all asset information domestically as well (once it’s established no probable cause is needed, or even a ‘suspicious activity report,’ what’s the difference), subordination of the global financial system to the IRS (and NSA) in a seamless surveillance web, and executive usurpation of the Senate’s treaty authority,” Jatras told The New American.
Fallout from the scheme may make the terror faced by U.S. expats look mild by comparison.
Millions More
Of course, Ruth Freeborn’s predicament was hardly unique. There are an estimated 7.5 million Americans living overseas. Facing collections by an insatiable federal government drowning its citizens in debts, record numbers of those Americans are being forced to surrender their citizenship.
No publicly available comprehensive record exists of all citizens who either renounced or relinquished their citizenship; however, in 2012, State Department data suggest around 2,000 renounced, up from 1,781 in 2011. For perspective, just 742 renounced their citizenship in 2009. Last year, FBI numbers show more than 3,100 renounced — not including those who relinquished.
“The reality is that the U.S. tax system gives dual citizens a good reason to walk away from their U.S. citizenship or permanent-resident status,” former federal prosecutor Jeffrey Neiman said about the growing trend. “It’s a painful process but easier than staying in compliance with the law.”
It is hardly an easy choice, but in many cases, it is now the only one for many U.S. expats — banks all over the world are starting to refuse American clients and shut down U.S. accounts. For a small-business owner or other middle-class American busy trying to sell U.S.-made products overseas, already at a massive disadvantage owing to being forced to pay taxes to two governments, such an obstacle can make it impossible to stay abroad as an American. The choices are either return to the homeland, or sever all ties with Uncle Sam.
“The biggest issue that we’re seeing from Americans overseas is that they are being locked out of financial products and services,” explained Marylouise Serrato, executive director of the group American Citizens Abroad, ACA Inc., citing FATCA and IRS compliance as the cause. “Some of the foreign banks have decided to remove Americans from their client list as a reaction to FATCA. A lot of the people affected are the small investors, people who just need checking accounts, savings accounts, to get by. They are the ones suffering.”
..........................................
View the complete article at:
http://www.thenewamerican.com/world-...er-heard-about
The New American
Alex Newman
4/8/2014
Excerpt:
It broke Ruth Freeborn’s heart to give up her U.S. citizenship that fateful day last year. Unfortunately for the Oklahoma native, though, it was either that, or her family. Ruth’s Canadian husband of 33 years, who earns all of the middle-class family’s income, “simply could not go along with this situation,” she explained. “To find myself suddenly not able to live, bank, save or to keep peace in my marriage while being American at the same time was shocking at first and deeply disturbing to me.”
Ruth wrote “what must have been” hundreds of letters to U.S. senators and officials, clinging to the hope that something — anything — could be done to stop what felt like a nightmare. Even as she protested, federal bureaucrats claimed that what was happening to her, and millions of other innocent Americans overseas, was somehow a “myth.” She knew it wasn’t a myth — after all, she was living it.
More than three decades ago, Ruth moved to Canada with her husband to help care for his parents, who were elderly and ill. Then the young couple had a son who was born with multiple disabilities and illnesses, making a move back to the United States all but impossible. All those years, though, Ruth went out of her way at every opportunity to show her community what it meant to be an American — doing volunteer work, helping out neighbors, making sure school children could learn in the best possible environment.
“At every turn I made sure to mention to others that the reason I did so much volunteer work was that I was raised to be this sort of person in the United States by my American family,” Ruth told The New American.
Then, in 2010, Congress passed and Obama signed a new tax law buried deep inside an unrelated “jobs” bill. That changed everything. Of course, even before that, it was already hard enough to be American overseas — filing endless amounts of paperwork with the IRS, paying taxes on worldwide income, disclosing foreign bank accounts and assets, and risking life-destroying penalties even for innocent mistakes. When the 2010 scheme became law, though, it was simply too much to bear.
Suddenly, Ruth, like millions of other everyday Americans overseas — missionaries, spouses, teachers, small-business owners, so-called accidental Americans who’ve never even stepped foot on U.S. soil, and countless others — were stuck in a Catch-22. Foreign banks were shutting down Americans’ accounts. Many businesses no longer wanted anything to do with “U.S. persons,” preferring to steer clear of the infamous IRS. Americans abroad were suddenly pariahs.
Ruth’s husband, who makes around $50,000 a year as a technician, drew the line at giving the Obama administration unfettered access to all of the family’s private financial information — and potentially even their meager savings if, for instance, the IRS claimed to uncover some minor mistake or oversight in the mountains of complex paperwork Americans abroad are forced to file every year. Moving to the United States was not an option either.
She cried a lot about it. “I’ll never be truly over the fact that I had to lose my citizenship but, it has happened,” Ruth said, adding that she is “horribly hurt” by all of it. “I still feel as if it must be some bad dream since it cannot be possible that the U.S., the country I loved with all my heart, has caused me to have to choose between my family here in Canada or my country of birth. And yet, it is real.”
To the political class in Washington, Ruth doesn’t exist. Like the millions of other Americans suffering hardship, she’s just a “myth” to the politicians and administration bureaucrats searching, like a flailing drug-addicted giant on the verge of collapse, for just a few extra dollars to stay afloat just a little while longer. Washington is determined to collect that extra billion or so per year in taxes.
So, in 2010, without any hearings or analysis, the Foreign Account Tax Compliance Act (FATCA) — hidden in the misnamed “HIRE Act” and passed largely by Democrats — was officially born. In essence, it is an attempt to turn every foreign government and financial institution on the planet into extensions of the U.S. tax regime, and is supposed to work by imposing huge penalties — a 30-percent “withholding tax” on all U.S. transactions, including sales of securities — on firms that do not hand over all information they have on “U.S. persons” to the IRS.
Among the institutions snared in the scheme are banks, stockbrokerages, hedge funds, pension funds, insurance companies, trusts, and more. For foreign institutions that do not wish to participate, the alternative is total exclusion from U.S. markets. The scheme also forces all “specified” Americans to file more byzantine paperwork disclosing even more assets abroad with their annual tax return, Form 8938, under threat of more devastating penalties that in many cases could exceed the value of the actual assets.
How It Came About
Amid the 2008 news that Swiss bank UBS helped some Americans avoid taxes, the shrieking from Capitol Hill was deafening. “These tax evaders cost our country tens of billions of dollars every year in unpaid taxes, and honest, law-abiding taxpayers pay the price,” claimed former Senate Finance Committee Chairman Max Baucus (D-Mont.), one of the chief proponents of the scheme. “Not only is this practice fundamentally unfair, this is money that could be used in any number of other important areas.”
More recently, wild figures based mostly on fantastical claims rather than actual data have jumped to $100 billion, $150 billion, or even $370 billion that Washington claims to believe is being “lost” to tax evasion. Democrats in Congress were determined to track down every last penny they believed they were owed, even if it meant turning the world upside down.
FATCA was based on “proposals included in President Obama’s 2010 Budget,” its architects in Congress admit. According to its congressional cheerleaders, it was supposed to bring in an extra $8.5 billion of tax revenue to the Treasury over the next decade. (For perspective, the federal government spends over $10 billion in a single day.) The added torment being endured by millions of innocent Americans living abroad — one of the new tax regime’s myriad effects — is supposedly just collateral damage, or a “collateral benefit,” as prominent anti-FATCA activist James Jatras with RepealFATCA.com put it.
“The real purpose, in my opinion, is eventually to achieve the power to receive all asset information domestically as well (once it’s established no probable cause is needed, or even a ‘suspicious activity report,’ what’s the difference), subordination of the global financial system to the IRS (and NSA) in a seamless surveillance web, and executive usurpation of the Senate’s treaty authority,” Jatras told The New American.
Fallout from the scheme may make the terror faced by U.S. expats look mild by comparison.
Millions More
Of course, Ruth Freeborn’s predicament was hardly unique. There are an estimated 7.5 million Americans living overseas. Facing collections by an insatiable federal government drowning its citizens in debts, record numbers of those Americans are being forced to surrender their citizenship.
No publicly available comprehensive record exists of all citizens who either renounced or relinquished their citizenship; however, in 2012, State Department data suggest around 2,000 renounced, up from 1,781 in 2011. For perspective, just 742 renounced their citizenship in 2009. Last year, FBI numbers show more than 3,100 renounced — not including those who relinquished.
“The reality is that the U.S. tax system gives dual citizens a good reason to walk away from their U.S. citizenship or permanent-resident status,” former federal prosecutor Jeffrey Neiman said about the growing trend. “It’s a painful process but easier than staying in compliance with the law.”
It is hardly an easy choice, but in many cases, it is now the only one for many U.S. expats — banks all over the world are starting to refuse American clients and shut down U.S. accounts. For a small-business owner or other middle-class American busy trying to sell U.S.-made products overseas, already at a massive disadvantage owing to being forced to pay taxes to two governments, such an obstacle can make it impossible to stay abroad as an American. The choices are either return to the homeland, or sever all ties with Uncle Sam.
“The biggest issue that we’re seeing from Americans overseas is that they are being locked out of financial products and services,” explained Marylouise Serrato, executive director of the group American Citizens Abroad, ACA Inc., citing FATCA and IRS compliance as the cause. “Some of the foreign banks have decided to remove Americans from their client list as a reaction to FATCA. A lot of the people affected are the small investors, people who just need checking accounts, savings accounts, to get by. They are the ones suffering.”
..........................................
View the complete article at:
http://www.thenewamerican.com/world-...er-heard-about